The Indian Economy Blog

March 10, 2006

Government Wages and Market Rates

Filed under: Business,Human Capital,Labour market — Naveen @ 12:24 am

Ajay Shah analyses the government wages and compares them with the prevalent market rates in Revising the wages of civil servants. The bottomline is captured below.

The main story is simultaneously that while GOI employees at the top are incredibly underpaid – by market standards – the bulk of GOI employees (roughly 98% of them) are incredibly overpaid by market standards. Example: the full cost of a driver at the Ministry of Finance was estimated by me to be four times bigger than the cost of an unorganised sector driver. Not 4% higher, not 40% higher, but four times higher.


  1. This topic is not related to government wages, just wages in general…kinda

    I was looking at the new Forbes richest list, and I saw that the combined wealth of the richest Indians surpasses that of the richest Japanese. (something like 98 billion to 67 billion)

    How are these billionaires building world class companies, while still managing to hold so much equity in their companies? Is it lack of competition? newly found opportunies? low interest rates?

    I know that in India the government is the last place you want put your money, and while I’m all about wealth creation before wealth distribution, it just feels wrong that we are ahead of Japan in this category.

    Comment by Patel — March 10, 2006 @ 4:34 pm

  2. indian stock market has tripled in the last 2 yrs….hence we see some new indian faces amongst billionares, when worldwide liguidity is switched off, sensex like many other emerging markets would stabilize at more sensible levels (3000)

    One of such billionaires is anurag who pimped for the high class prostitute, ruth parasol, and wrote code for online poker gambling (illegal in US)…and hit it big. what a state of affair..this dude is hiding in gibralter lest he gets captured by authorities…
    Now we know 75% of the indians live in misery. so obviously, a driver picked from such multitudes can easily be paid peanuts..Govt at least ensures decent wage for this guy..Amazingly, this blogger has lost his marbles in comparing the two…capital market is never perfect, and on the top what we get is crony capitalism or lobbying (bribing) capitalism…For the new converts amongst indians, who go gaga about capitalism, this is news perhaps. Their kith and kin in rampur are still bleeding as in the past.

    Comment by andiron — March 10, 2006 @ 7:04 pm

  3. I think give nthe per capita income and purchasing power parity of Indian people truth lies somewhere in middle.More so on Govt side.Yes A top govt official is underpaid but most of the private executives are overpaid more so after MBA wave.I have seen examples of my seniors who were not consiered employable by manufaturing companies like L&T or TATA or Maruti after their B TEch got plum jobs of managing things after their MBA with the same companies.Now contrast this with the brilliant guy who did not do MBA and was selected from campus itself.

    As far as talk of a govt driver being overpaid is concerned,I would say in private sector they are underpaid. Earlier low wages in govt sector couldbe justified given educational and healthcare needs of people were taken care by govt institutions but now when govt is withdrawing from tis sector it is preposterous to assume that same level of salaries should continue.

    Let me give an another exmple ,after class X NCERT organises a national level talen search contest to select some 700 students.It is the most prestigious exam at that age group in our country and you would find that most of IITians or top medical college students have cleared it. Now when this scheme was started in 1981 , scholarship was fixed at 300 ,500 ,1000 rs month for different stages of your education.Now remember in those days annual fees of IITs was somewhere 200 rs and same for statel level colleges. Also rupee had not depreciated that mush so this amount made sense and a student could make easy living.But these rates remain unchanged till today not paying any attention to drastic changes in economy during intervening period. So what you call an overpaid driver will be lead to a hand to muth existence within a few years if a pay commission is not set up.

    Comment by Anshul — March 10, 2006 @ 8:08 pm

  4. Given the high inflation in India, the salaries have not kept up with it. Also, i believe private sector salaries are way too higher than the public sector salaries. Also, another point to note is that Indian Army & Airforce are understaffed. They have in dire need of officer rank people. One reason quoted is that salary is not attractive !

    So, perhaps the move to increase the salaries is justified.

    Comment by Manpreet — March 13, 2006 @ 1:58 am

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